'For the past few months Sir Philip has been sitting in on Cowell's negotiations as his contracts with Sony and American Idol are up for renewal,' said the source.

'He's been acting like a manager. They have a bit of a good cop, bad cop routine with Cowell as the good cop.

There is nothing in development yet but they are planning for films, TV, merchandising, and multi-media divisions.'

It will be the first time Sir Philip - who owns Topshop and Bhs - has tried his hand at showbusiness but the venture with Cowell provides a potentially lucrative merchandising opportunity.

'They are talking about making profits running into billions as opposed to millions,' said someone who knows them both. Sir Philip would not comment, but a source close to the businessman, said: 'They are good friends and have talked about it for weeks on end.

'They can both see the opportunity for a business that is successful in lots of different areas.'

The company, yet to be named, is being launched at a time of slashed budgets and little investment but Cowell has been responsible for some of the biggest shows of the past decade.

The X Factor regularly attracts audiences of 15million, while Britain's Got Talent pulled in 19.2million for the final in May. Both are already sold to 30 countries.

Cowell is paid £22million a season as a judge on American Idol, which is the biggest show in the U.S. with more than 30million viewers. But he does not share in the profits, which go to Simon Fuller's company 19.

Similarly, while Cowell spearheads Syco, which co-produces The X Factor and Got Talent and is also a record label for reality stars such as Leona Lewis, it is effectively a division of Sony BMG.

This again means he is paid a hefty salary by Sony BMG and ITV but does not earn anything from the content or music sales.

A friend said: 'All his contracts are up for renewal. Simon wants to develop his own content. He will be on stage, and a producer, and develop ideas internationally.'